Minnesota insurers position themselves for health exchange

The Supreme Court has spoken, the presidential election is over and the federal government's health care overhaul has survived both tests.

Now, it's up to the state government and insurance companies in Minnesota to implement provisions of a complex law that promises to significantly alter the market for selling health coverage.

Late next year, consumers will be able to start buying policies through new state-level marketplaces known as "health exchanges" that would provide a Travelocity-style online shopping experience for individuals and small employer groups.

Insurers expect the health exchange for individuals in Minnesota to quickly become a destination for thousands of shoppers looking to tap government subsidies.

(Pioneer Press illustration: Kirk Lyttle)

Many rules of the road have yet to be written for how the health exchanges will work, but insurance companies are trying to make strategic moves, nonetheless. In many ways, this will mean finding a new way to connect with customers with marketing initiatives and plans that are creatively unique and also general.

And the plans are aiming at a moving target, being formulated as the requirements are being written.

UCARE'S EXAMPLE

The clearest example is Minneapolis-based UCare, which is seeking a new license so it can better design policies that will be attractive to health-exchange shoppers. It's a big shift for UCare, which has existed solely as an HMO for people in the Medicare and Medicaid public health insurance programs.

Advertisement

But even companies that already sell commercial policies to individuals expect to make changes to capture some of the significant growth projected for the individual market. In Minnesota, the market is expected to double to as many as 500,000 people.

In 2011, about 250,000 people in Minnesota were covered through individual insurance policies -- nearly 5 percent of the state's population. The policies generated $683 million in premium revenue, according to the Minnesota Department of Health.

"There's no question the market will grow everywhere," said Larry Levitt, a senior vice president with the Kaiser Family Foundation, a health policy group in California.

"The market will become much more consumer focused and, frankly, price competitive, as well," Levitt said. "It's very hard in the current market to compare prices because you have to go through underwriting to even see what your premium is going to be."

INDIVIDUAL BUYERS FORECAST TO DOUBLE

Traditionally, the individual insurance market has served people during times of transition, when things like a divorce, the loss of a job or a decision to become self-employed lead people away from employer-based benefits. It also offers coverage for young workers or lower-income folks -- groups that often find themselves in jobs that don't offer health insurance.

For many people, the individual market has been a relatively unhappy place to shop because consumers have lacked subsidies while also facing pre-existing condition exclusions.

But the market for individuals will change in both respects under the federal Affordable Care Act, which Congress passed in 2010. Beginning in 2014, the law will prohibit pre-existing condition exclusions while offering financial help to people within certain income limits.

The individual market in Minnesota is expected to grow as many of those who lack coverage start buying policies. Some also could turn to the individual market if employers decide to stop offering coverage.

"The number of individuals purchasing insurance outside the employment setting will double, rising to between 400,000 and 510,000 enrollees," wrote Jonathan Gruber, an economist at MIT, in an April report for the state Commerce Department.

Gov. Mark Dayton wants the health exchange in Minnesota to be governed by a public/private partnership, with a board comprising people from the public and private sectors. Individuals shopping on the health exchange likely will see some familiar names such as Blue Cross and Blue Shield of Minnesota, which controls more than half of the state's individual market.

UCare CEO Nancy Feldman in her organization's Minneapolis headquarters. In the past few months, the nonprofit applied for a license to operate as an insurance
company in Minnesota. That will give UCare more flexibility to design individual insurance policies than is allowed with the company's current HMO license, said Feldman. (Pioneer Press: John Doman)

INSURERS IN WAIT-AND-SEE MODE

But health plan officials are stopping short of making absolute promises that their companies will participate because many health-exchange details haven't yet been worked out.

"The exchange has to draft a participation agreement with each plan that says: Here is what we, the exchange, will provide to you, and here's what you need to pay," said Marcus Merz, the chief executive officer of PreferredOne, a nonprofit health insurer based in Golden Valley.

"We have a working assumption that we're going to participate in the exchange," Merz said. "It provides another avenue to consumers."

Officials with Milwaukee-based Assurant Health said they are taking a wait-and-see approach. The publicly traded company, which sells policies in Minnesota through John Alden Life Insurance Co. and Time Insurance Co., controlled about 8 percent of the state's individual market during 2010.

"Assurant Health will evaluate the decision to participate in exchanges on a state-by-state basis," the company said in a statement. "States have some flexibility in the implementation of their own state's exchange, and several factors that define how each state exchange will operate remain unclear at this time."

Despite the unanswered questions, UCare is pushing forward with plans to do business on Minnesota's health exchange.

In the past few months, the nonprofit applied for a license to operate as an insurance company in Minnesota. That will give UCare more flexibility to design individual insurance policies than is allowed with the company's current HMO license, said Nancy Feldman, the company's chief executive officer.

UCare has seen significant growth in recent years. Whereas membership stood at about 200,000 people in 2010, the company estimates it now serves about 300,000 -- thanks largely to UCare winning a contract to serve more people in the state's Medicaid program.

Continuing the growth trend isn't the most immediate reason UCare wants to compete on the health exchange, Feldman said. Many of the nonprofit's subscribers are covered through the state's MinnesotaCare health insurance program, and those beneficiaries might move into the health exchange in 2014.

By offering individual policies on the exchange, UCare might still provide coverage to the MinnesotaCare population. It also will make UCare a new option for other individual consumers.

"We're definitely planning hard, doing a lot of work on preparing for the exchange," Feldman said. "It's a big change."

TOWARD RISK MANAGEMENT

Health exchange rules will call on insurance companies to group policies according to a "metal" system based on actuarial values. That will force changes as carriers group their plans into bronze, silver, gold and platinum tiers, depending on the richness of benefits.

"All of our products are going to have to be tweaked to fit into these categories of coverage," said Dannette Coleman, a vice president with Medica, a nonprofit health insurer based in Minnetonka.

But other changes also are in the works.

Today, when individuals apply for coverage, insurers can ask about their health status and use the information to make decisions about whether to offer a policy, Coleman said. But starting late next year, insurers won't be able to ask about health status except for whether an individual uses tobacco.

As a result, insurers will be enrolling individuals who aren't as healthy and will need to connect them with health-management programs to control costs. Health plans will move "from a business of risk selection to a business of risk management," said Coleman, who serves on a Dayton task force on the state's health exchange.

It's unclear exactly what consumers in Minnesota will see next fall when they sit at a computer terminal and call up the health exchange's website. But Coleman said the example of Massachusetts -- which served as a model for the federal health law -- suggests that consumers searching for policies initially will see three things: a premium estimate; a brief description of copayments and deductibles; and the logo or name of the insurance carrier.

In such a world, an insurance company's brand becomes more important.

"That's probably why you're seeing a lot more advertising from all the carriers," Coleman said.

The need for insurance companies to make a direct connection with individual consumers is part of the reason Bloomington-based HealthPartners is experimenting with a health insurance shop at a mall in Minnetonka.

The store is scheduled to be open through mid-December, and it's too soon to say whether HealthPartners will replicate or expand the effort in the future, said Andrea Walsh, executive vice president with the nonprofit company. But HealthPartners is pushing forward with online and phone tools that it hopes will make it simpler for consumers to consider choices.

"Consumers are going to be challenged by the complexity," Walsh said. "I think our job as a health plan is going to increasingly be, how do we break through that clutter and make it easy and intuitive."

One of the health exchange details that still hasn't been ironed out is compensation for brokers who help individuals purchase coverage through the health exchange. Over the years, those brokers have served as an important distribution channel, said Kathy Dunmire, the vice president of product development for Eagan-based Blue Cross and Blue Shield of Minnesota.

Even with all the uncertainty and changes with the health exchange, Dunmire said the fundamentals of selling individual insurance policies stay the same.

"We want a simple portfolio of products that still offers choice," she said. "Making it simple and easy to understand will be important. Making sure you have broad distribution channels will be important, too."

Thanks to UCare's decision, the individual market in Minnesota will see at least one new carrier in 2014. Whether the market overall, however, sees more companies competing for business is less clear.

The nature of the competition likely will be tougher for companies, said Levitt of the Kaiser Family Foundation, since many individual policyholders who are locked into their coverage by pre-existing condition exclusions will have the chance to switch.

Plus, companies will lose the luxury of insuring only healthy people.

"There are some insurers out there now who profit by cherry picking, and they may not be able to compete in" the exchanges, Levitt said. "So, that could diminish competition."